1 Top-Notch Canadian Stock Down 30% to Buy for Immediate Dividends

Looking for immediate dividends? Here’s one long-term option that boasts a 5% yield while trading at a hefty discount right now.

The market is full of great long-term opportunities. Some of these are focused on long-term growth, while others can provide decades of juicy income. But what about catering to both? Is there a stock that can provide growth and immediate dividends?

The answer to that question is a solid yes, and that stock also happens to be trading down nearly 30% in the trailing 12-month period.

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Meet your next Canadian dividend stock to buy

That stock for investors to consider for immediate dividends is BCE (TSX: BCE). BCE is one of the largest telecoms in Canada, meaning that it offers some defensive appeal in addition to its income-earning potential.

That defensive appeal stems from the business model that telecoms like BCE adhere to. In short, telecoms like BCE offer subscriber-based services that generate a reliable revenue stream from customers.

That includes wireless, wireline, TV and internet segments. Interestingly, in the years since the pandemic ended, the necessity of both the wireless and internet segments has only increased, furthering the already impressive defensive moat.

Why is BCE trading down?

If BCE offers a defensive and increasingly necessary business, why then is the stock trading down nearly 30% over the trailing 12-month period?

Telecoms are expensive businesses to run. Upgrading the massive infrastructure takes time and significant investment, which is often financed through debt. And when interest rates rise (as they did several years ago), the cost of carrying on those enhancements increases, too.

This ultimately stifles future investment, puts cost pressure on current businesses, and leads to harsh, difficult, yet necessary cuts.

At BCE, those cuts started to hit over the past year. They included selling off a variety of media assets and trimming staff costs in one of the deepest reductions in decades.

BCE even sold off its multi-billion-dollar investment in MLSE, and slashed its cherished dividend by a whopping 56%.

The efforts did help stop the bleeding, as witnessed in the most recent quarterly update.

In that quarter, BCE reported net earnings of $683 million, reflecting a whopping 49.5% increase over the prior period. Free cash flow also increased significantly, coming in at $798 million.

What’s next for BCE?

BCE slashing its dividend doesn’t exactly scream “buy for immediate dividends”. Fortunately, there are other developments at BCE that do warrant some excitement.

BCE’s dividend currently sits at an annualized $1.75 per share. Given the current (still discounted) stock price, that works out to a still-impressive 5.8% yield.

This means that long-term investors who have an appetite for some risk can get a long-term gem (and the immediate dividends it offers) at a hefty discount.

In fact, given the current yield, investors who allocate just $10,000 into BCE (as part of a larger, well-diversified portfolio) will generate over $530, which can purchase more than a handful of shares through reinvestment.

Turning to growth, BCE’s sale of its MLSE holdings wasn’t only to pay down debt. In fact, the company used those funds for growth. BCE acquired U.S.-based Ziply, a fibre operator in the very underserved Pacific Northwest market.

To say that the growth potential for BCE in that segment is huge would be an understatement.

BCE: Buy for immediate dividends (and some growth)

BCE has all the components to become a stellar long-term growth play with the benefit of a juicy dividend. The company’s turnaround is already bearing fruit, and the Ziply acquisition comes with long-term appeal.

Throw in a juicy dividend, a defensive operation at home, and the prospect of interest rates finally coming down, and you have a stellar investment.

In my opinion, a small position in BCE, as part of a larger, well-diversified portfolio, is warranted.

Fool contributor Demetris Afxentiou has positions in BCE. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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